Saudi Arabia maps out stock market

Saudi Arabia is trying to diversify its economy

Saudi Arabia's most senior legislative body has voted in favour of a law to turn the country's current, informal bourse into a full-scale stock market.

The bill is now being referred to the cabinet for endorsement but King Fahd has the final say before it can become law.

The bill sets out measures to increase transparency and accountability.

The aim is to encourage foreign investment and to expand Saudi Arabia's relatively thin list of quoted firms.

Thin trading

The Saudi market is the biggest in the Arab world and its constituent companies are collectively worth $47bn (£29.3bn).

But only 68 firms are listed and in the past decade there have been just 13 new listings.

Trading is thin and declining, mostly because all but 27% of the shares on the market are owned by the government or wealthy individuals and families but also because the Central Bank-controlled bourse allows trading only between banks.

Just 20 industrial firms are listed, and the kingdom's biggest groups - such as Saudi Arabian Airlines and the National Commercial Bank - remain in private hands.

Oversight

The new law is intended to change that, by setting up an "independent" stock market commission to oversee a new legal framework for all capital-related activities.

The commission, the new law says, would be linked to the prime minister, who is the king.

Before any of the changes take place, however, the government is holding the kingdom's largest ever privatisation.

Saudi Telecom is being partially floated in February with the aim of bringing in 15.3bn riyals ($4.1bn; £2.5bn).